Reverse mortgages can offer home owners a convenient way to tap into their home’s equity to make more money available to be used however you wish. The loans have helped many people fund retirement. To get the basics of how reverse mortgages work, continue here.
However, if you are married and either you or your spouse are under 62 years of age, then you should become acquainted with the new marriage and age requirements for the loans.
How Reverse Mortgages Used to Work
Up until August, 2014, you could get a Reverse Mortgage only if all title holders were 62 years or older. If you were on title, then you were a reverse mortgage borrower and entitled to all of the benefits of the loan. If your spouse died, the reverse mortgage continued and the spouse could continue to live in the home and get all of the financial benefits of the loan.
However, some borrowers opted to remove spouses who were younger than 62 from the title. In these cases, some spouses could not continue to live in the home after the death of their husband or wife unless they could repay the reverse mortgage loan. The reverse mortgage came due when the borrower died.
The New Reverse Mortgage Rules
It is now possible to secure a reverse mortgage loan and protect the residency rights of a spouse who may be younger than 62 years.
If both you and your spouse are 62 years of age or older, then nothing has really changed about reverse mortgage eligibility. You both are: on title to the home, are listed as borrowers on the reverse mortgage loan, and are eligible to all financial and ownership benefits of the loans. And – as always – your loan amount is determined by the value of your home, the amount (if anything) you owe on the home and the age of the younger borrower.
However, if you or your spouse are under 62, there are a number of new requirements and rules for the reverse mortgage loan. There is now an important distinction:
- Primary borrower: To qualify for a reverse mortgage, someone in the household — the primary borrower — must be 62 years of age or older.
- Younger non borrowing spouse: For all new reverse mortgage loans, initiated after 8/2014, if the primary borrower has a spouse who is younger than 62 years of age, then this younger spouse is considered to be a non borrowing spouse.
Understanding the Reverse Mortgages With a Non Borrowing Spouse
In order to protect the residency rights of a young (under 62) spouse of a reverse mortgage borrower, new rules are now in place.
These are the key points to understand with regards to younger (non borrowing) spouses:
- Title: The younger (non borrowing) spouse must be removed from the title of the home. However, the non borrowing spouse needs to establish rights to the property in the event of the death of the primary borrower. Some ways to do this include: adding the non borrowing spouse back to title after reverse mortgage loan commencement, implementing a lease agreement, willing the home to the non borrowing spouse in a will or adding the property to a trust.
- Loan Amount: The age of the younger spouse will be used to determine your reverse mortgage loan amount – usually meaning a lower overall loan amount. Borrowers are no longer able to remove a younger spouse from the title in order to receive a larger reverse mortgage loan amount.
- Tenure/Residency: The younger (non borrowing) spouse has tenure rights and will be able to reside in the home for as long as they want after the primary borrower has died – assuming the home continues to be their primary residence and they continue to maintain the ongoing obligations of the home – property taxes, homeowner’s insurance and upkeep.
- Loan Proceeds: However, the younger (non borrowing) spouse will not be able to use any reverse mortgage proceeds (any amount left in a line of credit) or continue to receive annualized reverse mortgage payments. If there are remaining repair set asides, those would still be available to the non borrowing spouse.
- Divorce: Divorce will impact the non borrowing spouse’s rights to remain in the home and future spouses of the borrower will not be protected.
- Counseling: It is a loan requirement that both the primary borrower and the non borrowing spouse attend financial counseling. Topics will include implications of marital status, requirement to transfer ownership and signed non borrowing spouse disclosures.
- Certifications: There will be an annual check to verify ongoing marriage and primary residence status. The lender must be notified within 30 days of the primary borrower’s death and there must be annual residency certification after the borrower’s death.
